1H 2015 Top And Bottom Equity Funds: China Funds Lead The WayMARKET PERFORMANCE IN 1H 2015Over the past 6 months, Mr. Market has been throwing its tantrum over issues such as the Greek debt deal, China’s accommodative monetary policies and the timing of the Fed rate hike, sending shockwaves through the global equity markets. This has resulted in volatile swings within the equity markets and market players have, since then, become relatively more cautious and sensitive in response to the development of these key events.
Global equities posted rather muted performance in 2Q 2015, with the MSCI AC World index up by merely 0.8% for the quarter. Within the developed market space, both the US and Europe registered tepid return of 0.8% over the quarter while the Japanese equity market delivered a decent return of 4.6% in the same period (partly owing to the depreciation of yen against the ringgit). Emerging Market (EM) and Asia ex-Japan regions, likewise, followed their developed counterparts, with the former delivering a 0.8% gain while the latter increasing marginally by 0.6%.
Elsewhere, onshore Chinese equity market (A-share) fared relatively well as compared to the markets under our coverage. The China-A shares posted a strong gain of 11.6% over the quarter on financial reforms and the PBOC’s aggressive rate cuts, albeit with much volatility due to the curbing of margin trading by the government officials. The central bank’s aggressive monetary decisions also contributed positively to the Chinese H-shares and the Hong Kong equity market, with these markets returning 4.9% and 6.5% respectively. Within the EM and Asia ex Japan regions, commodity-based economies such as Indonesia (-12.0%), Brazil (-10.4%), Australia (-5.3%) and Thailand (-2.7%) saw their equity markets in the red over the quarter on the back of weak commodity price.
CONCLUSIONLooking ahead, equity markets are likely to be in for more volatility with the uncertainty looming over the timing of the Fed rate hike. Nevertheless, we expect equity markets to fare better in a growth-centric environment as equity asset class tends to perform better in rising yields environment.
With the expectation of a weakening ringgit moving forward, we urge local investors to have exposure to foreign equity markets as investors are poised to gain from foreign currency translation aside from the benefit of geographical diversification and the potential equity returns of investing overseas. Investors can consider having an overweight position within the Asia ex-Japan region as they present more attractive investment opportunities as compared to their developed market counterparts.
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